Investors Encouraged by Support for Apple AI Proposal
Growing pressure from shareholders for robust ethical guidelines and governance structures seen as sending signal to policymakers.
A proposal requesting greater transparency on AI at Apple failed to pass, but saw an optimistic response from experts ahead of what is set to be a busy year increased investor focus on the technology.
The proposal – filed by the pension trust of American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) – requested Apple to publish a transparency report on the company’s use of AI in its business operations. It also called on the firm to disclose any ethical guidelines that the company has adopted regarding its use of AI technology.
Despite Apple advising its shareholders to vote against, the resolution received 37.5% of votes cast. These included the firm’s eighth largest shareholder, Norges Bank Investment Management, and its tenth largest, Legal & General Investment Management. Both organisations had pre-declared they would support the resolution ahead shareholder meeting, as did UK-based asset manager abrdn.
“It’s a fairly strong level of support and it indicates there’s definitely [investor] interest,” Lindsey Stewart, Director of Investment Stewardship Research at Morningstar, told ESG Investor.
Stewart noted it was unlikely that Apple’s largest shareholders, such as Blackrock, Vanguard and Berkshire Hathaway, had backed the resolution. Given the three firms account for around a fifth of the firm’s stock, he said the resolution could have been backed by close to a majority of the remaining shareholders.
Asset manager Vanguard holds nearly 1.3 billion Apple shares – equating to 8.36% of Apple’s total common stock outstanding – and is the firm’s largest institutional investor shareholder. BlackRock is Apple’s second largest institutional shareholder with 6.3% of stock, while Berkshire Hathaway is third with 5.8%.
“We’re disappointed that the AFL-CIO resolution asking Apple to be more transparent about its AI practices was rejected by shareholders, but we are also encouraged by the notable level of support it received,” Stuart Riddick, Sustainability Manager at abrdn, told ESG Investor.
“We believe it is crucial that companies with significant exposure to AI technologies transparently disclose evidence of robust ethical guidelines, governance structures, oversight, and due diligence.”
Increasing investor attention
Apple is one of several large firms, including Alphabet, Amazon and Meta, to have received AI-related shareholder resolutions for their 2024 annual meetings. Entertainment group Disney is set to face a similar vote on 3 April requesting a transparency report.
AFL-CIO is a member of the Investor Alliance for Human Rights (IAHR), whose other member recently filed 14 shareholder proposals prompted by technology firms’ failure to address human rights risks inherent to their business models. These include risks posed by misinformation and disinformation driven by generative AI.
“The swift advancement and deployment of technologies, especially AI systems lacking thorough human rights due diligence, have led to negative impacts,” said Anita Dorett, Director of the IAHR.
She noted these issues are expected to escalate in 2024, and will be accompanied by a surge in new shareholder proposals demanding greater accountability in the development and deployment of AI.
The social risks of rapid and widespread use of AI were highlighted at the inaugural AI Safety Summit hosted in the UK last November.
The summit saw 28 countries sign the Bletchley Declaration, recognising the “urgent need” to understand and collectively manage potential AI risks. The signatories committed to identify AI safety risks of shared concern and building respective risk-based policies across our countries to ensure safety, but investors and other stakeholders have called for increased regulation.
“It’s clear that there is a need for regulation that is tailored to this kind of new technology,” said Stewart.
“Investor support for resolutions on the need for better information and safeguards within companies certainly sends a signal to the to the policymaking arena that more is needed.”
This May, South Korea is due to host a virtual AI summit, followed by a November in-person summit in France.
Strengthened investor asks
Non-profit the World Benchmarking Alliance (WBA) has also issued a new investor statement as part of its ongoing Collective Impact Coalition (CIC) for AI. The CIC engagement campaign was introduced in 2022 with the objective of driving the adoption of ethical policies and practices around AI by tech companies.
The statement called on investee first to implement policies and mechanisms to ensure the ethical development and application of AI. These include setting ethical principles to guide the development, deployment and procurement of AI tools, as well as implementing strong AI governance and oversight across the value chain of AI development and use.
Lead signatories include Fidelity International, Boston Common Asset Management and Candriam. “The launch of this phase acknowledges the need to strengthen our asks of companies, moving from high-level commitments towards more robust demonstration of action and oversight of critical issues identified,” said Emilie Goodall, Head of Stewardship for Europe at Fidelity International.
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